Interest on Obligations of Foreign Corporations. Where interest is paid on the obligations of foreign corporations from an office in this country, the intent of the law seems to be that the corporation, or its paying agent, shall report each payment. If such interest is not payable in the United States the first collection agency collecting the same is required to report the payment.8

Interest on Bonds of Foreign Countries. If interest on the bonds of foreign countries is paid in this country it seems that the paying agent of the foreign country is required to report each payment, regardless of the amount thereof. It is likely the names of non-resident alien payees will not be required, as such information would not be necessary to effectuate the law. If such interest is not payable in the United States the first collection agency in this country is required to report each payment, regardless of the amount thereof.9

Interest on Obligations of the United States. The law expressly provides that no information at the source is required in the case of payment of interest on obligations of the United States.1 10

State and Municipal Bonds. Although the interest received from state and municipal bonds is not subject to tax, the law does not expressly exempt such payments from the requirements as to information at the source; neither does it expressly include such payments. Procedure in this respect will depend upon rulings of the Treasury Department.

8 Id. § 28.

9 Id. § 28. 10 Id. § 28.

Procedure in Paying Income. In order that the payor of the income required by the law to be reported, may obtain the necessary information the law expressly provides, except in the case of reports of dividend payments and reports by brokers, that the name and address of the recipient of income shall be furnished upon demand to the person, corporation, or partnership paying income. No form of certificate to be used for this purpose has been prescribed at the present writing. All payers of income should obtain in some form the name and address of the recipient of such payment. It does not seem necessarily that the name of the owner of the income be obtained, as the law merely requires that the payor shall report the amount of the gains, profits and income and the name and address of the recipient of such payment.11

Return of Information at the Source. The law provides, with respect to dividend payments of corporations, that the return made by the corporation shall state the names and addresses of the stockholders, the number of shares owned by each, and, impliedly, the amount of dividend paid to each, during the period covered by the report, together with information as to the tax years and the applicable amounts in which such dividends were earned. With respect to the return to be made by brokers, the law provides that it shall state the names of customers (and impliedly their addresses) for whom such broker has transacted any business, with such details as to profits, losses, or other information which the Commissioner may require, as to each of such customers. In the case of all other payments the law requires the name and address of 11 Id. § 28.

the recipient of the payment and the amount of the gains, profits and income paid to him.

WHEN DUE. The law specifies no time for the filing of this return, but provides that the return shall be made in all cases when required by the Commissioner of Internal Revenue, under such rules and regulations, and in such form and manner as may be prescribed by him, with the approval of the Secretary of the Treasury.

WHERE FILED. The act does not specify where such return shall be filed. Forthcoming regulations on the subject will state whether the return is to be filed with local collector or with the Commissioner of Internal Revenue.

Collection of Foreign Payments. Where foreign payments of interest upon the bonds of foreign countries and interest from the bonds and dividends from the stock of foreign corporations, are made to residents of this country, individuals, partnerships or corporations, the first collection agency in this country is required to report the name and address of the recipient of such payment and the amount thereof. "First collection agency" as used in this chapter means the person, corporation or partnership, undertaking as a matter of business or for profit, the collection of foreign payments of such interest or dividends by means of coupons, checks or bills of exchange.12 The law provides that "all persons, corporations, partnerships, or associations, undertaking as a matter of business or for profit the collection of foreign payments of interest or dividends 12 Id. § 28.

by means of coupons, checks, or bills of exchange shall obtain a license from the Commissioner of Internal Revenue, and shall be subject to such regulations enabling the Government to obtain the information required under this title, as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe; and whoever knowingly undertakes to collect such payments as aforesaid without having obtained a license therefor, or without complying with such regulations, shall be deemed to be guilty of a misdemeanor and for each offense be fined in a sum not exceeding $5,000, or imprisoned for a term not exceeding one year, or both, in the discretion of the court.”' 13

License. Application for license for the collection of foreign items should be made to the collector of the district in which the business is to be carried on. Upon the acceptance of such application the collector will issue to the applicant, without cost, a license which will continue in force until revoked or cancelled.14

13 Act of September 8, 1916, §9 (f), as amended by Act of October 3, 1917.

14 Reg. 33, Art. 55.

CHAPTER 41

COLLECTION OF TAX AT THE SOURCE

Before the Amendment of October 3, 1917, the 1916 Law, and the 1913 Law, required collection of the tax at the source on payments of income to citizens and residents of the United States, as well as on payments to non-resident aliens. The Amendment abolished withholding at the source with respect to citizens and residents, except in the case of the payment of interest on corporate bonds containing covenants to pay the tax.1 On the payment of such interest to individuals, 2% is required to be withheld at the source, as more fully explained in the following paragraphs. At the present time withholding at the source is required, (a) on payment of fixed or determinable annual or periodical gains, profits and income (except dividends) of any non-resident alien individual; (b) on payment of income derived from interest upon bonds of domestic or other resident corporations by non-resident foreign corporations not engaged in trade or business in the United States and not having an office or place of business therein; (c) on payment of income derived from dividends on the stock of domestic or other resident corporations by non-resident foreign corporations not engaged in business or trade within the United States and not having an office or place

1 Act of September 8, 1916, § 9 (c) as amended by Act of October 3, 1917.